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Nifty to consolidate amid stock specific action…

Tec hnical Outlook

* The index reacted from the higher band of ongoing c onsolidation (18200) last week resulting in bear candle. In the process, it approached lower band of past four week’s price action, which also c oincides with 50 day EMA (currently at 17700). Consequently, the daily and weekly stochastic osc illators also noticeably c ooled off to approach oversold trajectory with readings below 30

* Going forward, we expect the N ifty to extend its ongoing c onsolidation amid lack of faster retracement on either side while holding its key support threshold of 17500 levels. Stock specific outperformances will continue as markets are undergoing a healthy sectoral churn post Q2 earnings

* Over past 18 months, Price-wise N ifty has maintained the rhythm of not correcting for more than 7-9% while holding its 50 days EMA and timewise intermediate corrections have got arrested within four to five weeks, barring one instance. As index has already c orrected 5.5% over past four weeks, we expect index to hold 17500 and attract incremental buying demand as larger structural uptrend remains intact. Hence, dips should be capitalised on to accumulate quality stocks

* Sectorally, Capital goods, Telec om, Auto are expected to outperform while BFSI provide favourable risk-reward setup. Pull backs in Metal space are expected to be short lived

* In large caps we prefer Reliance, HDFC, SBI, Bharti Airtel, L&T, Tata Motors, SBI Life, Tech Mahindra, while in Midcaps we like Cyient, Coforge, Dixon, ABFRL, Gokaldas Exports, Carborandum Universal, Brigade Enterprises, G reaves Cotton, Jamna Auto, Fortis Healthcare, Radico Khaitan, SCI, TCI Express, NRB Bearings

* The broader market indices are relatively outperforming despite extended profit booking in the benchmark. Currently, both indices are forming a higher base above 50 days EMA that has been held since June 2020, highlighting robust price structure. We expect Nifty midcap and small cap indices to extend their c onsolidation amid lac k of faster retracement on either side and witness stock specific action

* Structurally, the formation of higher peak and trough on the monthly chart signifies robust price structure that makes us believe that ongoing breather would find its feet around 17500-17600 range as it is October 2021 low which is placed at 17452 and value of rising 10-week moving average placed at 17500 level In the c oming session, the index is likely to open on a flat to negative note tracking mixed global cues. We expect, buying demand to emerge around the 50 days EMA. Hence, use dips towards 17690-17715 f or c reating long position for target of 17805.

NSE Nifty Daily Candlestick Chart

Nifty Bank: 37976

Te chnical Outlook

* The weekly price action formed a bear candle as the index after last four weeks’ corrective decline is currently testing the crucial support area of 37800 . Consequently, the daily and weekly stochastic oscillators also noticeably cooled off to approach oversold trajectory with a reading below 25

* Key observation is that the index since April 2020 has not corrected for more than four -five weeks barring one instance while 50 days EMA has acted as strong support during each of the corrective phase . In the current scenario with four weeks of decline already behind us, we expect the index to maintain the rhythm and form a higher base around the 50days EMA

* Going ahead, we expect the index to enter into a consolidation in the broad range of 37500 -39100 amid stock specific action

* The index has already taken 17 sessions to retrace just than 80 % of the preceding 16 sessions up move (36876 -41829 ) . A shallow retracement highlights a positive structure and a higher base formation . Hence we believe the current breather should not be seen as negative instead it should be capitalized to accumulate quality banking stocks for the next leg of up move . Buying on dips strategy has worked well on multiple occasions inthe last 18months

* On the higher side the last week high of 39100 which also coincides with the 38 . 2 % external retracement of the entire last four week’s breather (41829 -37748 ) is likely to act as immediate hurdle for the index

* The support for the index is placed at 37800 -37500 levels being the confluence of :

* 80 % retracement of the previous major up move (36876 -41829 ) placed at 37870 levels

* the upper band of the recent sevenmonths range breakout area

* The rising demand line joining lows since May 2021 is also placed at 37600

* In the coming session, index is likely to open on a flat note amid mixed global cues . We expect, the index to continue with its consolidation and buying demand to emerge around the crucial support area of 37800 . Hence use intraday dips towards 37830 -37910 for creating long position for the target of 38170 , maintain a stoploss of 37720.

Nifty Bank Index – Daily Candlestick Chart

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